The Influence of Stock Ownership Structure on the Effectiveness of Internal Control

Purpose Improving the effectiveness of internal control has become the key to ensure the healthy development of China’s listed companies and safeguard their interests. Corporate governance and ownership structure will affect the implementation of internal control of listed companies. This paper empirically tests the effects of ownership concentration, institutional ownership and executive ownership on the internal control of listed companies and their influencing mechanisms. Design/Methodology/Approach Based on the data of all A-shares in Shanghai and Shenzhen stock markets from 2015 to 2019, this paper builds a utility model based on the principal-agent theory, and uses SPSS22.0 software to conduct an empirical study. Findings We find that ownership centralization has a significant positive correlation with effectiveness of internal control, which can appropriately improve the degree of ownership concentration and internal control. There is a significant positive correlation between the institutional shareholding ratio and the executive shareholding ratio and internal control. The listed company can introduce diversified investment subjects to realize the diversified power balance mechanism. Moreover, through the improvement of a good holding ratio, to the greatest extent to meet the income between different shareholders, improve the corporate governance structure, and then improve the effectiveness of internal control. Research Implications Results show that there is no significant correlation between the degree of equity balance and the effectiveness of internal control. Different degrees of checks and balances have different positive effects on the effectiveness of internal control.